Oil prices looked set to finally break their record breaking
12-day losing streak on Wednesday morning, but analysts remain
concerned that prices could drop below $50 a barrel.

Ad

By about 8:20 a.m. ET, the price of West Texas Intermediate, the
US benchmark, was trading at $56.27 a barrel, a gain of 1.04%,
while Brent crude, the international benchmark, was up 1.3% at
$66.31.

The price increases came after a trading session on Tuesday when
oil lost as much as 7% of its value and
seem related to a report from Reuters that the OPEC cartel of
oil producers and its partners were discussing cutting oil output
by up to 1.4 million barrels a day.

"It's been a perfect storm for oil as of late, with lower global
growth expectations, higher output from the US, Russia and Saudi
Arabia, waivers on Iranian sanctions and general risk aversion in
the markets sending Brent and WTI rapidly into bear market
territory," Craig Erlam, a senior market analyst at Oanda, said
on Wednesday.

Ad

Tuesday's drop, which saw both Brent and WTI fall by about 7%,
was driven largely by a tweet from US President Donald Trump
urging Saudi Arabia not to cut production. The tweet came in
response to Khalid al-Falih, Saudi Arabia's oil minister, saying
the kingdom was likely to cut production by about 500,000
barrels.

Data released last week by the Energy Information
Agency showed US oil inventories climbed by 5.8 million
barrels in the week to November 2, while production hit a weekly
record of 11.6 million barrels a day.

The oil market had already been under pressure since the
beginning of October amid trade tensions and concerns over rising
interest rates.

Prices may well have further to fall. Erlam said he "wouldn't be
surprised to see" prices for WTI to slip to $50 a barrel, and
Brent to $60.

"It's not too long ago that people were talking about the
prospect of $100 a barrel oil but that now feels like a distant
memory," he said.

The chart below illustrates the drop in WTI oil prices seen since
its peak in October: